Friday, November 18, 2016

World Bank Reports Big Jump in Living Standards of Poor Pakistanis

A November 2016 World Bank report says that Pakistan has successfully translated economic growth into the well-being of its poorest citizens. It says "Pakistan’s recent growth has been accompanied by a staggering fall in poverty".

Rising incomes of the poorest 20% in Pakistan since 2002 have enabled them to enhance their living standards by improving their diets and acquiring television sets, refrigerators, motorcycles, flush toilets, and better housing.

Another recent report titled "From Wealth to Well Being" by Boston Consulting Group (BCG) also found that Pakistan does better than India and China in translating GDP growth to citizens' well-being.

One particular metric BCG report uses is growth-to-well-being coefficient on which Pakistan scores 0.87, higher than India's 0.77 and China's 0.75.

Big Poverty Decline Since 2002:

Using the old national poverty line of $1.90 (ICP 2011 PPP) , set in 2001, the percentage of people living in poverty fell from 34.7 percent in FY02 to 9.3 percent in FY14—a fall of more than 75 percent. Much of the socioeconomic progress reported by the World Bank since 2000 has occurred during President Musharraf's years in office from 2000-2007. It has dramatically slowed or stagnated since 2010.

Source: World Bank Report Nov 2016

Using the new 2016 poverty line of $3.50 (ICP 2011 PPP),  29.5 percent of Pakistanis as poor (using the latest available data from FY14). By back casting this line, the poverty rate in FY02 would have been about 64.3 percent.

Pakistan's new poverty line sets a minimum consumption threshold of Rs. 3,030 or $105 (ICP 2011 PPP) per person per month or $3.50 (ICP 2011 PPP) per person per day. This translates to between Rs. 18,000 and Rs. 21,000 per month for a household at the poverty line, allowing nearly 30% of the population or close to 60 million people to be targeted for pro-poor and inclusive development policies—thus setting a much higher bar for inclusive development.

Multi-dimensional Poverty Decline:

A UNDP report released in June 2016 said Pakistan’s MPI (Multi-dimensional poverty index) showed a strong decline, with national poverty rates falling from 55% to 39% from 2004 to 2015. MPI goes beyond just income poverty.

The Multidimensional Poverty Index uses a broader concept of poverty than income and wealth alone. It reflects the deprivations people experience with respect to health, education and standard of living, and is thus a more detailed way of understanding and alleviating poverty. Since its development by OPHI and UNDP in 2010, many countries, including Pakistan, have adopted this methodology as an official poverty estimate, complementing consumption or income-based poverty figures.

Rising Living Standards of the Poorest 20% in Pakistan:

According to the latest World Report titled "Pakistan Development Update: Making Growth Matter" released this month, Pakistan saw substantial gains in welfare, including the ownership of assets, the quality of housing and an increase in school enrollment, particularly for girls.

First, the ownership of relatively more expensive assets increased even among the poorest. In the bottom quintile, the ownership of motorcycles increased from 2 to 18 percent, televisions from 20 to 36 percent and refrigerators from 5 to 14 percent.

In contrast, there was a decline in the ownership of cheaper assets like bicycles and radios.

Housing quality in the bottom quintile also showed an improvement. The number of homes constructed with bricks or blocks increased while mud (katcha) homes decreased. Homes with a flushing toilet almost doubled in the bottom quintile, from about 24 percent in FY02 to 49 percent in FY14.

Dietary Improvements for the Poorest 20% in Pakistan:

Decline in poverty led to an increase in dietary diversity for all income groups.

For the poorest, the share of expenditure devoted to milk and milk products, chicken, eggs and fish rose, as did the share devoted to vegetables and fruits.

In contrast, the share of cereals and pulses, which provide the cheapest calories, declined steadily between FY02 and FY14. Because foods like chicken, eggs, vegetables, fruits, and milk and milk products are more expensive than cereals and pulses, and have lower caloric content, this shift in consumption also increased the amount that people spent per calorie over time.

For the poorest quintile, expenditure per calorie increased by over 18 percent between FY02 and FY14. Overall, this analysis confirms that the decline in poverty exhibited by the 2001 poverty line is quite credible, and that Pakistan has done remarkably well overall in reducing monetary poverty based on the metric it set some 15 years ago, says the World Bank.


In spite of Pakistan's many challenges on multiple fronts, the country has successfully translated its GDP growth into the well-being of its poorest citizens. "Pakistan’s recent growth has been accompanied by a staggering fall in poverty", says a November 2016 World Bank report.  An earlier report by Boston Consulting Group reached a similar conclusion.

Related Links:

Haq's Musings

Pakistan Translates GDP Growth to Citizens' Well-being

Rising Motorcycle Sales in Pakistan

Depth of Deprivation in India

Chicken vs Daal in Pakistan

China Pakistan Economic Corridor

ADB Raises Pakistan GDP Growth Forecast


Realistic said...

Basically Mr. Haq - you are pointing towards the Macro Economic stabilization that started in Musharraf's era (after three years of Musharraf being in power) that laid the foundation for this positive development.

As we all know that impact of macro level economic policies does not yield immediate results as might be claimed by some PMLN supporters - like they claim Gawadar Port (6th inauguration) and CPEC (third inauguration) in Sharif's era.

Please correct me where am I implying things incorrectly. Thanks!!

Riaz Haq said...

Realistic: " As we all know that impact of macro level economic policies does not yield immediate results as might be claimed by some PMLN supporters - like they claim Gawadar Port (6th inauguration) and CPEC (third inauguration) in Sharif's era."

Yes, you are right.

If you look at the graphs, you'll see that the World Bank report covers period from 2002 to 2014. It also says that progress has considerably slowed since 2010.

Junior said...

I read the same report but it says growth has NOT translated into well-being (**marked?)

Here is that paragraph from the Executive Summary page:

Pakistan’s growth accelerated in FY16, driven by consumption while investment
remained low. Exports continued to fall when soft global demand exacerbated the
effects of Pakistan’s long-term decline in competitiveness. After achieving
macroeconomic stability, the government continued to deliver on its structural
reform agenda in FY16, but much remains to be done if growth is to be
strengthened and sustained. The government’s next challenge will be to invest in**********
health, education and nutrition; Pakistan’s staggering fall in poverty over the last 14 *
years has not been accompanied by a similar improvement in wellbeing. The *
country’s long-term growth depends on this investment in its people—this is what
will make growth matter for Pakistanis.

Riaz Haq said...

Junior: "I read the same report but it says growth has NOT translated into well-being"

I disagree with your interpretation. It does not say that "growth has NOT translated into well-being"

What it does say is that " Pakistan’s staggering fall in poverty over the last 14 years has not been accompanied by a similar improvement in wellbeing".

Pay attention to the words "staggering" and "similar" in the sentence.

What it means is that the improvement in wellbeing has not been as staggering as the fall in poverty.

Read it again:

Boston Consulting Group reports it quantitively in terms of growth-to-well-being coefficient on which Pakistan scores 0.87, higher than India's 0.77 and China's 0.75. Among South Asian nations, Bangladesh scores much higher at 1.03. The top ten countries in “current well-being” remain in Western Europe.

nayyer ali said...

Very interesting data. Looks like Pakistan changed its definition of poverty from the the parameter the World Bank has set for "extreme poverty" to a somewhat higher standard, which gives a better picture of how many people in Pakistan are poor.
Pakistan has made good progress in material living standards, but it does lag India and Bangladesh in infant mortality. Also, while it does a better job than India at secondary and tertiary education attainment, it lags in getting to universal primary enrollment. There is still underinvestment in basic education and health.
The CPEC is going to be transformative. If a country has good economic policies, then development is highly contingent on electricity generation, infrastructure, and education. CPEC will help with the first two in a big way, and economic growth should see a long term shift upward.
Current Pakistan GDP per capita at purchasing power is around 4500 dollars. If developed status means per capita income reaches 20,000, that means a bit more than 2 doublings. 5% per capita GDP growth (7% overall growth) would get Pakistan to that level in 3 decades.
For all its ups and downs, the concept of Pakistan has been a big success, if we take the benchmark as what happened to the Muslims that stayed in India instead.

Anonymous said...

I am sure Benazir Income Support Program has also played some role in poverty reduction.


Riaz Haq said...

World Bank poverty data

Below $1.90 PPP: Pakistan 7.9% India 21.2%

Below $3.10 PPP: Pakistan 43.6% India 58%

Riaz Haq said...

#Pakistan’s Middle Class Soars as Stability Returns - WSJ. #economy #middleclass

Pakistan, often in the headlines for terrorism, coups and poverty, has developed something else in recent years: a burgeoning middle class that is fueling economic growth and bolstering a fragile democracy.

The transformation is evident in Jamil Abbas, a tailor of women’s clothing whose 15 years of work has paid off with two children in private school and small luxuries like a refrigerator and a washing machine.

For companies like the Swiss food maker Nestlé SA, such hungry consumers signal a sea-change.

“Pakistan is entering the hot zone,” said Bruno Olierhoek, Nestlé’s CEO for Pakistan, saying the country appears to be at a tipping point of exploding demand. Nestlé’s sales in Pakistan have doubled in the past five years to $1 billion.

Although often overshadowed by giant neighbors India and China, Pakistan is the sixth most-populated country, with 200 million people. And now, major progress in the country’s security, economic and political environments have helped create the stability for a thriving middle class.

An unpublished study last year that measured living standards, from Pakistani market research firm Aftab Associates, found that 38% of the country is middle class, while a further 4% is upper class. That’s a combined 84 million people—roughly equivalent to the entire populations of Germany or Turkey.

Such households are likely to have a motorcycle, color TV, refrigerator, washing machine and at least one member who has completed school up to the age of 16, the study found. Official figures show that the proportion of households that own a motorcycle soared to 34% in 2014 from 4% in 1991, and a washing machine to 47% from 13% over that same period. These trends are also attracting international business.

In December, Royal FrieslandCampina NV, a Dutch dairy company, paid $461 million to buy control of Engro Foods, a Pakistani packaged milk producer in a country where most milk is sold unpasteurized from open milk containers.

“What we see is consumer spending is rising and a middle class coming up,” said Hans Laarakker, Engro’s new chief executive.

Late last year, China’s Shanghai Electric Power agreed to pay $1.8 billion for a majority of Karachi’s electric supply company; Turkish electrical appliance maker Arçelik paid $258 million for a Pakistani appliance maker, Dawlance, saying Pakistan has an “increasingly prosperous working and middle class”; and French car maker Renault SA said it was seeking to set up a plant in Pakistan.

Meanwhile, during the past three years, deaths from terrorist attacks have fallen by two-thirds, as the army battles jihadists. Economic growth reached an eight-year high of nearly 5% in the past financial year, and China has begun a multibillion-dollar infrastructure investment program. The Karachi stock market rose 46% last year and continues to soar.


In the developing world, the ability to purchase durable goods such as motorcycles—which itself can lead to new opportunities in employment, education and leisure—is generally viewed as an indicator of a middle class lifestyle. Motorcycle purchases soared in Pakistan to 2 million a year now from 95,000 in 2000, leading Honda Motor Co. to double its production capacity there. Buyers of Honda’s cheapest motorcycle typically earn between just $200 and $300 a month, which would put them well below the poverty line in the West, but here that gives them disposable income.

“All these big companies globally, if they’re not looking at Pakistan, need to look at Pakistan, because it’s a huge consumption economy emerging,” said Saquib Shirazi, chief executive of Honda’s Pakistan joint venture.

Riaz Haq said...

Manmohan Koshle’s job is to get #Indians to use #toilets: “You can’t imagine the hostility” #India #Modi … via @WSJ

Long before Prime Minister Narendra Modi vowed to build “smart cities” and mega ports, he mounted the ramparts of New Delhi’s historic Red Fort and announced his most high-profile project: toilets.

Hundreds of millions of Indians don’t have or use them, an issue of such urgency that Mr. Modi made resolving it by 2019 central to his plans to modernize his country.

Soon after, Manmohan Koshle, the informal headman of Nimora village, in the central Indian state of Chhattisgarh, received a midnight phone call from a local official, with an order: Make Nimora “open-defecation free,” or “ODF” in the argot of Indian bureaucracy.

Since that day, Mr. Koshle said, “all I have thought about is toilets, toilets, toilets.”

But some Nimora villagers—and at least 40% of Indian households—still don’t use them. Mr. Modi’s campaign illustrates the profound challenges the country faces in becoming a first-world economic power. Toilet nonuse lies at the core of India’s most-pressing health and development problems, including the spread of bacteria and viruses, diarrheal deaths and childhood stunting. It risks the safety of women who must go outside in the dark.

The program has added 33 million new household toilets since 2014—a faster pace than before—but is still falling behind its goal of reaching 110 million in 2019. Villages that are hurriedly declared “ODF” aren’t always so.

The toilet-building frenzy, tallied on a government website, shrouds a bigger problem: many who get toilets don’t use them. Some consider it impure to use indoor toilets. At times, fathers-in-law refuse to share toilets with their daughters-in-law.

In houses unconnected to sewage systems—the majority of village residences—people worry about cleaning latrine pits, a job associated with those formerly known as “untouchables.” Others don’t see the need to change.

“I like to take a walk,” said Luv Nishad, 35, a laborer in the village of Nagar, “and do my business away from where we sleep and pray.”

Since the 1980s, thousands of toilets built by successive governments were never used. Mr. Modi’s “Clean India” initiative, launched in 2014, was meant to change that.

But, officials and sanitation experts say, the rush to show record-breaking progress is, in many places, leading to old mistakes.

Riaz Haq said...

#Pakistan's #oil demand jumps 13% on low prices, growing #economy - Oil | Platts News Article & Story. #energy …

Pakistan's oil consumption from July 2016 to February 2017 jumped 13% year on year, owing to lower petroleum product prices and higher economic activity, driven by GDP growth, foreign investment and greater political stability.

Pakistan's economy expanded 4.2% in 2016, foreign investment has continued to grow -- attracted by the multi-billion dollar China-Pakistan Economic Corridor project -- and improvements in the country's security front, following the government's efforts to combat terrorism, have also led to economic gains and additional investment.

Oil sales during the first eight months of the current fiscal year rose 13% year on year to 16.67 million mt, according to data from oil marketing companies and the Pakistan's Oil Companies Advisory Committee. Pakistan's fiscal year runs from July to June.

Motor gasoline sales increased to 4.36 million mt, up 20% year on year, while demand for high speed diesel increased 15% to 5.46 million mt, the data showed.

"Sales of both products moved north due to significantly lower prices and lower availability of compressed natural gas in the transport sector," said Muhammad Saad Ali, research analyst with Karachi-based brokerage Inter Market Securities.

The price of Pakistan's motor gasoline peaked in October 2013 at Rupees 114 ($1.1)/liter compared with Rupees 73/liter currently, while high speed diesel was at Rupees 117/liter versus the current price of Rupees 82/liter.

Sales of furnace oil also increased to 6.21 million mt from July 2016 to February 2017, up 10% year on year, driven by higher consumption by the power generation sector amid lower water levels and weak hydroelectric production.


Looking ahead, Pakistan's oil products demand is expected to see substantial growth over the next three years because of rising per capita income, higher automotive sales and growing foreign investment, according to data from energy experts and analysts.

"We believe that oil marketing companies' sales will increase in the backdrop of active transportation activity owing to projects near the China-Pakistan Economic Corridor, rising auto-financing loans and higher per capita income," said Ayesha Fayyaz, research analyst at Karachi-based brokerage Shajar Capital Ltd.

Gasoline demand is expected to increase to 10.9 million mt in the fiscal year ended June 30, 2020, from 5.8 million mt in the year ended June 2016.

The forecast is well above earlier estimates made by Pakistan's Oil Companies Advisory Committee, expecting gasoline demand to reach 8.78 million mt by 2019-20.

"Motor gasoline and high speed diesel sales will continue to be driven by improving macroeconomic factors, and rising sales of cars, bikes and rickshaws," analyst Umair Naseer of Karachi-based Topline Securities said.

"Under CPEC, there will be construction of road infrastructure and industrial units. This, we believe, will lead to an increase in transportation activity and higher gasoline and diesel demand," Naseer added.

The outlook seems less promising for furnace oil, Fayyaz said.

"We are conservative about the volumetric growth in furnace oil due to the expansion of the LNG and hydroelectric power sectors," she said.

Riaz Haq said...

#Pakistan Iron/Steel mfg output up 17.46%, electronics up 13.5%, pharma up 7.5%, autos up 6.9% in 7 months of FY17 …

In January, LSM output edged up 1.08 percent over the same month last year and rose 2.78 percent as compared to December 2016. Iron and steel production was also the highest (28.02pc) among all the main industries in January, closely followed by engineering products (27.69pc).

Engineering sector’s output, however, slid 0.54 percent in July-January, while textile sector – having the largest weight in the LSM basket – registered the lowest 0.29 percent growth during the period. Textile output marginally increased 1.23 percent in January.

The PBS data showed that electronics sector was the second after iron and steel in terms of growth in the seven months with 13.49 percent, followed by non-metallic products (7.78pc), pharmaceutical (7.57pc), automobiles (6.91pc), paper and paper board (6.61pc), food, beverages and tobacco (4.79pc) and rubber products (0.38pc).

The sectors, which posted decline in production in July-January FY17, included wood products (95.82pc), followed by leather products (17.54pc), chemicals (2.13pc) and coke and petroleum (0.67pc).

The LSM’s quantum indices are based on data from Oil Companies Advisory Committee (OCAC), ministry of industries and provincial bureau of statistics. Ministry of industries, which logs production stats of 36 items, recorded 3.78 percent increase during the July-January period of 2016/17.

The ministry recorded the highest production growth in tractors’ output. Total 25,983 were manufactured during the period, up 79.42 percent over the corresponding period last year. The second significant percentage growth (54.93pc) was recorded in production of trucks, followed by billets/ingots (29.65pc), buses (26.19pc), sugar (22.25pc) and motorcycles (20.09pc). Mills produced 2.893 million tonnes of sugars in July-January FY17 as compared to 2.366 million tonnes in the corresponding period of FY16.

Provincial bureau of statistics, which measures outputs of 65 products across the country, registered 3.48 percent rise in the period under review. Production of deep freezers jumped 52.64 percent to 53,509 units, followed by electric fans (27.94pc), refrigerators (22.59pc), woolen and carpet yarn (18.91pc), electric bulbs (16.37pc) and electric meters (15.71pc).

OCAC, which calculates production of 11 petroleum products, registered a marginal 0.29 percent increase in outputs. Production of liquefied petroleum gas rose 10.49 percent to 276.687 million litres. Motor spirits’ output soared 8.66 percent to 1.438 billion litres. Jute batching oil production increased 5.68 percent, followed by jet fuel oil (3.83pc) and high speed diesel (1.67pc).

Diesel oil production, however, fell 44.51 percent in July-January FY17 over the corresponding period of FY16, followed by solvant naptha (18.78pc), kerosene oil (13.27pc) and lubricating oil (2.49pc).

Riaz Haq said...

Philippines, Pakistan help motorcycle makers avoid the skids
Demand in two countries surges just as sales slow elsewhere in Asia

SADACHIKA WATANABE and JUN ENDO, Nikkei staff writers

The Philippines and Pakistan have become bright spots in Asia's motorcycle market, helping to offset slowdowns in other key countries.

Like the Philippines, Pakistan is providing some much-needed vroom. Sales are rising by double digits in the South Asian country, which has a population of nearly 200 million but gross domestic product per capita of $1,500 -- half the Philippines' figure.

Improved security is giving consumers more confidence to buy motorbikes. Sales surged 18.9% last year, to 1.43 million units, according to industry figures. Auto researcher Fourin estimates the market was actually 1.8 million to 2 million, factoring in imports by Chinese manufacturers.

Honda plans to double its motorcycle production capacity in Pakistan in the 2015 to 2018 period. It is already capable of turning out 1 million motorbikes.

Yamaha Motor, which dissolved its local joint venture in 2008, built a new plant to re-enter Pakistan in 2015. Motorcycles with 70cc engines are selling well, and Yamaha aims to buff its brand with a 125cc model.
Despite a population of 100 million, the Philippines' motorbike market is less than half that of Vietnam, which is home to 90 million people. The wealthy tend to own cars, while low-income earners typically get around on Jeepneys and other public transportation in urban areas.

But a couple of Japanese bike manufacturers -- Honda Motor and Yamaha Motor -- have sought to change that with scooters featuring automatic transmissions. Their marketing drives, coupled with rising income levels, are giving sales more zip.

Riaz Haq said...

#Pakistan's bottom quintile #income share has increased from 8.1% to 9.6% since 1990. It is the highest in #Asia, #world, according to UNESCAP Statistical Yearbook. #inequality …

Although more people in China have
lifted themselves out of poverty than any other
country in the world, the poorest quintile in that
country now accounts for a lower percentage
of total income (4.7 per cent) than in the early
1990s (8.0 per cent). The same unfortunate
trend is observed for a number of other
countries, including in Indonesia (from 9.4 per
cent to 7.6) and in the Lao People’s Democratic
Republic (from 9.3 per cent to 7.6).

In a number of other countries, people in the
poorest income quintile have increased their
share of total income including in Kyrgyzstan
(from 2.5 per cent to 7.7), the Russian Federation
(4.4 per cent to 6.5), Kazakhstan (7.5 per cent to
9.5) and Pakistan (8.1 per cent to 9.6).

Riaz Haq said...

Punjab leads in household income, according to HIES 2018-19

The monthly income of all quintiles increased in the range of 5% to 22% and the major surge was recorded in the income of the lowest two quintiles, which appeared to be beneficiaries of the government’s economic policies.

The lowest quintile’s average monthly income stood at Rs23,192, higher by Rs3,450 or 17.5% and sufficient to finance the expenses.

The second-lowest quintile’s income stood at Rs29,049, which was 22% or Rs5,223 more than the previous year’s income and also higher than the pace of increase in expenses.

The middle-income group saw a 12% increase in its income to Rs31,373. The higher middle-income group’s average monthly income increased to Rs37,643, showing 11.8% growth.

The average monthly income of the highest income group was estimated at Rs63,544, higher by 5.1%, still short of matching the growth in expenses.

Riaz Haq said...

The headline multidimensional poverty (MPI) figures for Pakistan (0.198) are worse than for Bangladesh (0.104) and India (0.069). This is primarily due to the education deficit in Pakistan. UNDP's report titled "Unpacking Deprivation Bundle" shows that an average Pakistani still enjoys a better "standard of living" than his/her counterparts in Bangladesh and India. Below is an excerpt from it:

"The analysis first looks at the most common deprivation profiles across 111 developing countries (figure 1). The most common profile, affecting 3.9 percent of poor people, includes deprivations in exactly four indicators: nutrition, cooking fuel, sanitation and housing.7 More than 45.5 million poor people are deprived in only these four indicators.8 Of those people, 34.4 million live in India, 2.1 million in Bangladesh and 1.9 million in Pakistan—making this a predominantly South Asian profile "

Also note in this UNDP report that the income poverty (people living on $1.90 or less per day) in Pakistan is 3.6% while it is 22.5% in India and 14.3% in Bangladesh.

Living standards (Cooking fuel Sanitation Drinking water Electricity Housing Assets) of the poor in Pakistan (31.1%) are better than in Bangladesh (45.1%) and India (38.5%).

Pakistan fares worse in terms of education (41.3%) indicators relative to Bangladesh (37.6%) and India (28.2%).

In terms of health, Pakistan ( 27.6%) fares better than India (32.2%) but worse than Bangladesh (17.3%).

In terms of population vulnerable to poverty, Pakistan (12.9%) does better than Bangladesh (18.2%) and India (18.7%)